Pharmaceutical companies have fired the first shots in a battle with the UK’s NHS over a de facto tax on medicines they pay to the government, warning that Britain could lose £6bn in research and development.
The Association of the British Pharmaceutical Industry, the trade body for major drugmakers, said the “excessive” tax on UK drugs paid by manufacturers means Britain will lose £5.7 billion in R&D investment over the next five years. years.
Under the UK’s Voluntary Pricing and Access Scheme for Branded Medicines, an agreement between the Department of Health and the pharmaceutical industry, companies must pay a percentage of their UK revenues to the government if the NHS drug bill rises by more than of 2%. annually.
Drugmakers are strongly opposed to how this year they will pay 26.5% of their UK sales to the government, saying the UK has one of the most punitive ‘clawback’ regimes in the world.
In research commissioned by the ABPI, consultancy WPI Economics said that if the pay rate were kept between 20% and 30%, £5.7 billion of R&D investment would be lost between 2024 and 2028.
This, in turn, would translate into a loss of UK gross domestic product of over £50 billion by 2058, WPI added.
Richard Torbett, chief executive of the ABPI, said the WPI research “shows the false economy of excessive tax rebates applied to pharmaceutical companies”.
The current voluntary scheme between the health department and drugmakers is due to expire at the end of 2023, and negotiations on the next deal are expected to start at Easter, with the pharmaceutical industry pushing for a recovery rate of less than 10% of revenues. .
Torbett said “we are asking the government to make an ambitious new deal with the industry that . . . puts us on a par with our global competitors.”
The UK has been negotiating voluntary agreements with pharmaceutical companies since 1957, trying to keep NHS drug costs in check while encouraging investment in future drugs.
Pharmaceuticals signed the latest deal in 2019, agreeing to limit the total NHS drug bill to a 2% increase each year and to pay prescriptions above that level.
In the first three years, drug makers had to pay 5-10% of UK sales to the health department, but by 2022 the recovery rate has risen to 15% and then to 26.5% this year. .
US drugmakers AbbVie and Eli Lilly in January became the first pharmaceutical companies to pull out of the voluntary scheme with the UK government in protest of the sharp increase in reimbursement payments.
However, their move means that, from April, they will fall under a British statutory scheme, under which they must pay 27.5% of revenues to the government.
Meanwhile, Germany’s Bayer said in January it was cutting jobs in Britain because of the UK drug tax.
While none of the big pharmaceutical companies focused on patented drugs have claimed that their drugs are unprofitable under the voluntary agreement with the UK government, around four in 10 drugs covered by the scheme are off-patent.
This sector of the industry is pressing for its drugs to be excluded from the scheme.
Mark Samuels, chief executive of the British Association of Generic Manufacturers, said its members were being hit with a “double whammy”: paying the ransom on top of prices that are 70 to 90 percent lower than the originator drugs.
Celltrion Healthcare, a South Korean maker of generic versions of biologic drugs, is preparing to withdraw a breast cancer treatment from the UK, claiming the recovery scheme wipes out its profits from the drug.
Matt Eddleston, Celltrion’s chief commercial and operations officer, warned that the company might even pull out of the UK. “All options are on the table,” he said.
Fiona Thomas, chief medical officer at KPMG, which advises pharmaceutical companies, said the UK was “out of balance” with other countries, with its recovery scheme taking 26.5% of annual government revenue.
“In the rest of Europe, it’s usually less than 10%, many in the single digits,” he added.
Drugmakers complain they are wrongly shouldering the cost of expensive Covid-19 drugs through the government’s voluntary scheme.
But Rob Kettell, director of trading for commercial medicines at NHS England, said this was wrong because the scheme exempted central government purchases for pandemic preparedness, including vaccines.
The increase in the recovery rate seems to reflect, in part, the faster adoption of new and more expensive drugs.
Kettell said the NHS has accelerated access to new medicines, with more creative commercial arrangements. “This is something that has benefited both companies and patients. That means faster access to new patients and past prescriptions,” she added.
He also said that the voluntary scheme’s pay rates were in line with forecasts that the government had communicated “very, very clearly” to the pharmaceutical industry to help it plan.
Having been involved in negotiating the current voluntary scheme while at the health department, Kettell said the government was trying to create a ‘win, win, win’: ensuring rapid access to new medicines for patients, supporting the UK’s life sciences industry Kingdom and ensuring cost-effectiveness for the taxpayer.
Olivier Wouters, assistant professor of health policy at the London School of Economics, said the timing of drug manufacturers’ reaction to the UK drug levy was “suspicious” and perhaps even “fear-mongering”.
“It seems like a strategy to enter into renegotiations, because if they simply leave the voluntary scheme, they will be in the statutory (regime) and paying more”, he added.
The health department said WPI’s report to the ABPI was “unreliable” and was based on the opinion of companies that had an interest in the UK spending more on medicine.
“Drug spending represents the second largest proportion of the overall NHS budget after staff costs,” he added. “By controlling the rising cost of medicines, we ensure good value for money for the taxpayer and allow the NHS to continue to invest in access to new medicines and other NHS services.”